Media - A seasonal boost until the end of the year

We are maintaining our NEUTRAL view on the media sector. The YTD November gross adex grew by +5.1% YoY (or +13.5% MoM) on the back of the higher growth seen in the Pay TV (+17.8%) and FTA TV (+4.3%) segments, although this was partially offset by a low Newspaper (-1.0%) segment. Moving forward, we expect the total adex spending to continue to grow in the last month of this year as advertisers rush to finish their yearly advertisement budgets. Hence, we deem our full-year adex growth rate estimate of 7.5% YoY (based on a 1.5x GDP multiplier) to be achievable. There are no changes in our media companies’ CY12-CY14 earnings forecasts. We are maintaining an OUTPERFORM rating on Media Chinese International (“MEDIAC”) with an unchanged  target price of RM1.23 based on a targeted FY13 PER of 11.8 (+0.5 SD). Meanwhile, while we are keeping our Star Publications’ (“STAR”) FY12-FY14 earnings forecasts and its target price at RM3.11, we see value emerging in the stock after it has plunged 17.3% since the early of November. The stock is currently trading at 11.1x FY13 PER (or lower than a -2SD below the mean), the lowest level since CY05. We have thus upgraded our STAR recommendation to an OUTPERFORM from a MARKET PERFORM previously. Our Media Prima’s (“MEDIA”) MARKET PERFORM call and target price of RM2.34, meanwhile, remain unchanged.  

The YTD November gross adex grew by +5.1% YoY to RM10.2b  according to Nielsen. The decent YTD growth was mainly driven by the Pay TV (+17.8%) and FTA TV (+4.3%) segments despite a lower contribution from the Newspaper (-1.0%) segment. We reckon that the higher YTD performance in the Pay TV segment was on the back of the yearend festivities coupled with the higher discount rate provided by the Pay TV operators, which translated to a higher adex spending. On a MoM basis, the total adex surged by 13.5% on the back of the higher adex spending in the Pay TV (+27.6% MoM), FTA TV (+12.0% MoM) and newspaper (+4.2% MoM) segments amid advertisers’ aggressive spending to meet their annual adex budgets towards the year-end. On top of that, the strong adex growth in November was also fuelled by the higher spending in the Cinema segment (+188% MoM) as a result of more movies shown during the holiday season. On market share, Pay TV continued to grow its share to 25.2% (vs. 22.7% a year ago) at the expense of the shrinking market share in newspaper (38.5% vs. 40.8% previously). FTA TV’s market share meanwhile remained relatively stable at 27.7% (27.9% previously). 

Newspaper YTD gross adex fell by 1.7% YoY to RM3.4b. The relatively weak performance here was mainly caused by the contraction in both the English (-6.4% YoY) and Chinese (-0.1% YoY) segments although this was partially offset by the higher contribution from the Malay (+2.7% YoY) segment. On a MoM basis, all the languages newspapers recorded positive growth of 3.9% in total in November. Notably, the BM newspaper recorded a decent MoM growth of 5.7% followed by the English (+3.9%) and Chinese (+1.6%). MEDIAC, STAR and MEDIA’s newspaper gross adex recorded a +0.9% YoY, -2.1% YoY and 4.2% YoY growth, respectively, in November. 

The YTD Pay TV gross adex continued to gain by 17.8% YoY to RM2.6b at the expense of FTA TV, which merely improved by only 4.3% YoY. On a MoM basis, both the Pay and FTA TV adex climbed by 27.6% and 12.0%, respectively. The strong YoY adex growth in the Pay TV segment was mainly due to a higher discount rate coupled with an additional ten more channels (to 22 stations) being added to Nielsen’s Pay TV segment portfolio. MEDIA’s gross TV adex, meanwhile, surged by 27.4% YoY (or 11.6% MoM) to RM282.7m in November, thanks to the strong performance across its in-house channels namely 8TV (+33.5% YoY to RM55m); NTV7 (+14.6% YoY to RM49m); TV3 (+19.5% YoY to RM131m) and TV9 (+67.7% YoY to RM48m). On the Pay TV front, Astro PRIMA, Astro RIA and Astro Wah Lai Toi channels continued to rank as the top three highest adex generators as they contributed an aggregate RM964m in gross adex or 38% of the total YTD Pay TV gross adex of RM2.6b. On market shares, the Pay TV segment has improved by 300 basis points YoY to 47.8% in its YTD TV adex at the expense of the FTA TV segment. 

Source: Kenanga